Sangam (India) Limited ANNUAL REPORT 2012-13
Forward-looking Statements The report contains forward-looking statements that involve risks and uncertainties. When used in this discussion, the words like ‘plans’, ‘expects’, ‘anticipates’, ‘believes’, ‘intends’, ‘estimates’, or other similar expressions as they relate to Company or its business are intended to identity such forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The Company’s actual results, performance or achievements could differ materially from those expressed or implied in such forward-looking statements. The Company undertakes no obligation or responsibility to publicly amend, update, modify or revise any forward-looking statements, on the basis of any new information, future event, subsequent development or otherwise.
How to Navigate this Annual Report ? Style & Substance
2-3
Sharp cuts & Custom fits (about us)
4-5
Wrinkled shirts & Faded denims
6-7
Measures & Memories
8-9
(we continued to overcome challenges in 2012-13)
(financial performance of past 5 years)
Stretched & Comfortable (CMD’s review of the year gone by)
10-11
Management Discussion and Analysis
20-29
Directors’ Report
30-35
Corporate Governance Report
36-45
Financial Section
46-75
Corporate Information
74
Style
is the substance of the subject called unceasingly to the surface. - Victor Hugo
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
AT SANGAM, WE HAVE TAKEN GREAT PRIDE IN CONSISTENTLY DELIVERING PRODUCTS THAT EPITOMIZE STYLE.
2
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
T
his is where the story begins… Continuous improvement in everything we do is at the heart of our approach to attain sustainable growth. We continue to work hard and attend to the minutest detail across our units to offer unmatched customer experience, both in terms of product quality and affordability. In doing so, we have not only successfully managed to overcome our share of external as well as internal challenges; but more so, expanded our presence across the value chain – from yarn to branded garments to retail. And this is where the story gets even more interesting… With the Indian textiles sector still reeling under the pressures of high inputs cost, capacity stagnation, growing competition and pricing limitations, we continued to strive through challenges. Our dedicated efforts towards brand building, cost controls and widening the product range have kept us afloat, even during the toughest of times. We have further utilised this downturn to consolidate our operations further and focus on the core business. In the process, we have not only managed to outperform in terms of financial performance, but also have fortified our foundation to embark on the next phase of growth. More importantly successfully adapted to the changing trends to keep our stakeholders stylish. Because, as always, good style also needs great substance.
3
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
WHAT YOU NEED TO KNOW ABOUT US.
4
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
Three decades young
established in 1984
Among the leading players in Indian textiles sector
Flagship company of ` 4000 crore Sangam Group
presence in PV (polyester viscose) dyed yarn and fabrics; market leader in PV dyed yarn with 25% share
diverse business interests across textiles, steel, infrastructure, power and energy sectors
Led by Mr. RP Soni, Chairman & first generation entrepreneur
Fully integrated product portfolio from fiber to fitting
backed by 7000+ employees across four locations
• Yarns - PV and Cotton • Texturized yarn • Woven fabrics • Branded suiting • Denim fabric • Wind power
5
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
Capacities Division
Production Capacity
Spinning (Ring Spinning)
201216 Spindles / 55000 MT p.a.
Spinning (Open End)
3904 Rotors/17000 MT p.a.
Synthetic Fabric
18 Million Meter p.a.
Denim Fabric
32 Million Meter p.a.
Fabric Processing
53 Million Meter p.a.
Knitted Fabric
18 Machines /3000 MT p.a.
Texturized Yarn
7200 MT p.a.
Thermal & Wind Power
36 MW
Where can you find us? Corporate office
Registered office
Manufacturing facilities
Mumbai, Maharashtra
Atun, Bhilwara, Rajasthan
Biliya Kalan, Bhilwara, Rajasthan Sareri, Bhilwara, Rajasthan Atun, Bhilwara, Rajasthan
Brands that define us
The network that markets us
• Sangam Suitings • Sangam Denims • Sangam Yarns
More than 100 dealers and 1000 retailers across India
Public listed National Stock Exchange (Scrip code – SANGAMIND) and the Bombay Stock Exchange (Scrip code – 514234)
6
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
WE CONTINUED TO OVERCOME CHALLENGES IN 2012-13
What kept us busy during the year? • Total yarn production increased by
What did we achieve in 2012-13 over 2011-12?
14.32
61,430 tonnes in 2012-13, from 53,735 tonnes in 2011-12 percent to
• Total fabrics production increased by
32.06 percent to 55.06 mn meters in 2012-13, as against 41.70 mn meters in
2011-12 • Signed renowned actor Mr. Ajay Devgan as the new brand ambassador for Sangam
• Net revenues up by • • •
Suitings • While the revenues from textiles division
15 percent; the income from toll receipts dipped by 58 percent.
•
increased by
•
4.4 percent to
` 1479 crore EBIDTA up by 38.4 percent to ` 214 crore Net profit up by 200 percent to ` 51 crore EBIDTA margin up 357 bps to 14.5 percent Net profit margin up 226 bps to 3.5 per cent Earnings per share up 200 percent to ` 13
7
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
NUMBERS THAT MATTER
NET TURNOVER (` in crore)
1500
1417
1479
1172
1200 900
EBIDTA (` in crore)
852
150
600
100
300
50
0
0
09-10 10-11
11-12
12-13
60
128
09-10 10-11
150
57
51
40
11-12
17
137
12-13
125
120 90
30
90
94
60
17
30
10 0
155
CASH PROFIT (` in crore)
50
20
214
194
200
NET PROFIT (` in crore)
8
250
0 09-10 10-11
11-12
12-13
09-10 10-11
11-12
12-13
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
EARNING PER SHARE (`)
14.4
15
13.0
12 9 6
4.4
4.3
3 0
09-10 10-11
11-12
12-13
PRODUCT-WISE REVENUES 2012-13
Others 10%
2011-12
Yarn 53%
Fabric 37%
Yarn 51%
Others 17%
Fabric 32%
GEOGRAPHY-WISE REVENUES 2012-13
2011-12
Export 20%
Export 22%
Domestic 80%
Domestic 78% 9
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
SHRI RP SONI REVIEWS THE PERFORMANCE OF THE PAST YEAR AND SHARES HIS INSIGHTS ON SANGAM’S FUTURE PLANS BEING A LEADING TEXTILES PLAYER IN THE COUNTRY, WE UNDER
With the Indian economy slowing down, as it did in the past
THE IMPORTANCE OF PRESSURE. IT DOES WONDERFUL THINGS
couple of years; the aim for every relevant business has shifted
INDEED! THE MORE THE CLOTH GETS STRETCHED, THE MORE
from value-multiplication towards responsible value creation.
ADAPTABLE AND DURABLE IT BECOMES. THE ART IS HOWEVER,
This surely means that the growth rates would not shoot off
TO UNDERSTAND WHAT AMOUNT OF PRESSURE CAN BE
the roof as an anamoly; but would continue to tread a charted
BENEFICIAL TO THE CLOTH AND WHAT AMOUNT CAN MAKE
path. We at Sangam India chose to pursue high-value business
IS UNUSABLE. THIS IS THE FINE LINE WE HAVE SUCCESSFULLY
rather than large volume business. We also recaliberated our
WALKED DURING 2012-13. POST THE DISMAL PERFORMANCE
business focus towards our core – textiles sector and exited the
POSTED DURING 2011-12, ALBEIT DUETO UNCONTROLLABLE
infrastructure business. However, we would continue to execute
FACTORS; WE DECIDED TO NOT CHALLENGE BUT ADAPT TO
the infrastructure projects, mainly roads as a part of our Group
THE NEW NORMAL.
operations. We also rationalised our costs to a great extent as
The world has changed quite a lot in the past five years. The
a dedicated mission across our units thereby retaining our focus
volatility in the energy prices coupled with economic, social and
to emerge as a leaner organisation offering a quality product
political turbulence have become more frequent. The leading
portfolio to cater to a large aspiring population.
economies have lost steam and India has wavered off completely
When hard work translates into tangible results, that itself is a
from its 8+ percent growth rate to record the lowest GDP growth
proof of treading the right path. In 2012-13 we have registered
rate in past nine years. However, all is not lost. India continues
satisfying numbers. Our revenues improved by 4.4 percent
to remain among the youngest nations in the world. A blend
despite a dip of 58 percent in the income from toll receipts.
of youth, aspirations, employment and dipping savings rate is
The realisation in the denim and PV yarn segment coupled with
transforming the country everyday. To dress well is no longer a
improved margins in textured yarns and fabrics have helped boost
luxury but a necessity. Faster replacement cycle is clearly visible
our top line. In our continuous pursuit towards sustainable growth,
in every wardrobe owing to changing trends and higher incomes.
we have focused on creating a research-led organisation. Our
However, with rising uncertainties and larger middle class, the
ability to spot, decipher and replicate the latest trends, styles
demand for PV garments is expected to sustain, sans hiccups.
and customer expectations; thereby developing products based
However, the new normal calls for newer measures to thrive in
on the inputs and quickly penetrating the markets have enabled
such environment.
us to improve our leadership in key segments. At the same time, our research instincts within the organisation have enabled us streamline processes, eliminate wastages and yet initiate quality
10
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
benchmarking and improvements across our divisions. Our timely
large opportunity and Sangam Denims’ value proposition. We
investments in expansion and debottlenecking the capacities
continue to receive heartening response for our products and
have enabled us to capitalise upon the rising demand for our
would continue to further expand our horizon to cover larger
products, especially in wake of higher cotton prices and inherent
share.
demographic advantage in India. Our margins also improved during
We remain confident that the impact of the measures taken
the year, which not only uplifted our spirits but helped us to
over the years would translate into numbers going forward. I
meet our stakeholders’ expectations.
would like to thank each and every stakeholder of the company
In 2012-13, we continued to strengthen our brand. We have
for supporting us and believing in our credentials. Our focus is
signed renowned actor Mr. Ajay Devgan as a brand ambassador
unwavering. Our commitment is unfaltering. Our future is exciting.
for our Suitings and we believe that the partnership will help us
And we trust our style.
capture better recall for our products in the minds of our existing
RP Soni,
and prospective customers. On the other hand, we undertook
Chairman
dedicated marketing initiatives for our denim products, by reaching out and sensitising large number of dealers across India upon the
RP Soni, Chairman
11
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
EVOLVING FROM A YARN PRODUCER TO AN AFFORDABLE BRANDED GARMENTS PLAYER
12
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
At Sangam, while our products are not only intrinsic to man’s existence; their demand in the past decade has also been influenced by rising income and lifestyle changes. •
A sharp increase in per capita income.
•
An increased need to look more fashionable.
•
An evolution towards specialized finishes resulting in value-added fabrics.
•
An increased priority in matching different clothes for different days, places and moods.
•
The journey to create a sustainable business model often commences with asking the most basic of all questions: will customers need our products?
A continuous shift in preference from unbranded to branded apparels coupled with faster replacement cycles.
At Sangam India, we are well equipped to capture the full value arising from this transition. Through our presence at every point in the manufacturing value chain- from the manufacture of PV yarn to blended yarn to fabric (processed) to branded apparels. As we complete our three successful and memorable decades in Indian textiles sector, we continue to take fresh strides. We continue to go back to the basics – asking relevant questions that matter.
13
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
CAN WE OFFER TOMORROW’S TRENDS AT YESTERDAY’S PRICE?
14
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
We at Sangam India have always believed in establishing a trend rather than following an established trend. This has enabled us mould our business model to suit our size, our customers and the geographies we operate in. A high degree of customization has also enabled us to create an affordable fusion of fashion and function, which epitomizes the spirit of our customers. In the past five years, we undertook the following initiatives: •
Having anticipated the “great Indian consumption story”, we were amongst the first in the industry to ensure sustained investments in building capacities since 2005
•
To mitigate any adverse impact on the Company’s finances; we followed a ‘phased expansion’ strategy – by creating capacities in volume-led PV yarn business first and then sweating it out to invest in value-driven business such as readymade garments and denims
•
The ready capacities provided us an edge to capitalize on the market demand faster while the scale enabled us stem the erosion in margins despite rising input costs
•
We continuously invested in debottlenecking existing capacities at incremental cost in various processes, thereby enhancing process cost efficiencies.
•
We focused on automation, thereby reducing manual labour, shortening turnaround time across our units and at the same time reducing long-term process cost.
15
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
CAN OUR CUSTOMERS SPEAK FOR OUR PRODUCTS WHILE OUR PRODUCTS SPEAK FOR THEMSELVES?
16
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
At Sangam, we believe that brand endures only if quality sustains. Therefore, we had always focused on delivering world-class quality across our product range. This single-minded effort put consistently over the past three decades have culminated into a strong relationship with all our clients. With the commencement of fabric production in 1985, we extended into serious brand building efforts. •
We chose to foray into the branded garments segment with Suitings and Denims, with key value proposition of affordable style. In the past three years, we have gained a respectable market share in both these segments based on our premium products and wide dealer network spread pan-India.
•
To satiate the growing demand for denim, we expanded our capacities to 32 mn meters p.a. to emerge as seventh largest player in the second fastest growing and populous economies globally.
•
We refreshed our branding strategy by signing Mr. Ajay Devgan as the new brand ambassador for our Suitings range, thereby improving our brand recall amidst value-conscious classy customers.
•
Most importantly, we continued to invest into world-class machines and processes, which not only resulted in lower controllable costs but also enabled us to offer superior quality of yarns, fabrics and garments to our clients consistently.
17
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
CAN WE EMPOWER ASPIRATIONS AND ASPIRE TO EMPOWER AT THE SAME TIME?
18
ANNUAL REPORT 2012-13
SANGAM (INDIA) LIMITED
We at Sangam believe that a Corporate is simply an extension of the society and therefore has to lead the society’s progress and welfare. Therefore we strive harder to maintain a balance between our corporate aspirations and social and environmental motives. We actively pursue the philosophy of promoting inclusion – be it in terms of empowering our employees or in terms of sponsoring talents to realising their dreams. •
We support education actively and therefore extended our focus towards promoting value-based education by establishing Sangam University in city of Bhilwara, Rajasthan. Our engineering and management institute has churned up over 15,000 students.
•
We have established and manage a state-of-the-art hospital which has the best-in-the-region facilities in primary, diagnostic and tertiary healthcare. The hospital has 100 beds and is served by a highly experienced and motivated team of doctors and support staff.
•
Being an environment-conscious company, we regularly organizing green initiatives across Bhilwara, spreading awareness about ecosystem preservation and energy conservation.
19
CONCEPT, DESIGNED AND PRODUCED AT Fortuna Public Relations Pvt. Ltd. (www.fortunapr.in)